Prime Minister Narendra Modi has called a high-level meeting with top cabinet ministers, in which he is expected to discuss ways to cut oil imports by 10% amid rising fuel prices and pressure on Current Account Deficit (CAD), ET Now reported. In FY18, India imported 220 mt of crude oil, which was roughly 80% of total domestic consumption.
Narendra Modi has set the target of cutting oil imports by 10% by 2022 by shifting the energy dependence on biofuels. The Prime Minister will hold the meeting with Finance Minister Arun Jaitley, Commerce Minister Suresh Prabhu and Oil Minister Dharmendra Pradhan to discuss ways to reduce India’s dependence on oil imports, the news channel reported.
Rising oil prices have an impact on fuel prices, the rupee value, trade deficit, current account deficit and fiscal deficit. Due to rising oil prices, fuel prices have been spiralling out of control. The recent tax relief by the central and state governments also seems to be short-lived.
The meeting has been called against the backdrop of Iran sanctions to discuss long-term and short-term plans to find better and cheaper alternatives for India’s oil needs. Meanwhile, Indian refiners have placed additional crude oil demand of four million barrel from Saudi Arabia, a move which may partly compensate for fall in imports from Iran in the wake of US sanction kicking-in on November 4.
As part of its strategy to rein in CAD, the government recently hiked customs duty on Aviation Turbine Fuel or jet fuel by 5% to curb imports but also reduced excise duty by 5% to benefit domestic fuel/oil companies. As per the Reserve Bank of India (RBI) data, India’s CAD widened to 2.4% of the GDP in the first quarter of the current financial year.
The International Monetary Fund (IMF) in its recent report warned that CAD may widen to 3% as compared to 2.8% projected earlier and against 1.9% in the last financial year.